Judgment:
1. These appeals arise from Order-in-Original dated 7.5.97 passed by the Collector of Central Excise, Madurai. By this order he has confirmed a duty demand of Rs. 37,034/- being the duty on the differential value of Rs. 7,05,412.24 during the period 1990-91 under Section 11A(2) of Central Excise Act, 1944. There is penalty of Rs. 5,000/- on the first appellant under Rule 9(2) and 173Q of C.E. Rules, 1944. He has imposed penalty on 9 partners of Rs. 1,000/- each under Rules 173Q and 209A of Central Excise Rules, 1944.
2. The allegation in the show cause notice is that the appellants are the manufacturers of Printing Ink falling under sub-heading No. 3215.00 of the Central Excise Tariff Act, 1985. During the year 1990-91, the unit had filed the Price List under Part-I and the same price list was approved by the department. On 9.5.91. the Assistant Collector along with Preventive staff visited the unit. On scrutiny of the documents and the records relating to the manufacture and clearance of Printing Ink during the year 1990-91, the officers noted that though the unit had filed the Part-I Price List for the year 1990-91 and got it approved, the unit had never sold printing ink to unrelated independent buyers. Instead, the unit had consumed the printing ink captively or had cleared the same to their sister unit viz. M/s. The Orient Color Crafts. The clearance for captive consumption and to the sister units should have been effected under Part-IV or VI-B respectively. But the unit had not filed any price lists under Part-IV or VI-B but had filed only Part-I price list under which they effected these clearances. The total turnover of the unit during the Financial Year of 1990-91 was Rs. 18,28,813.60 and the duty was paid by the unit only on the above value.
But the scrutiny of the records revealed that the unit had not arrived at the cost structure of the printing ink in the proper manner and there was undervaluation in the prices of the printing ink. The officers arrived at the total cost of printing ink by cost construction method. The cost of raw materials consumed during the year 1990-91, the apportioned wages for the ink turnover, the apportioned overhead expenditure and apportioned gross profit margin of the ink turnover and the Electricity consumed, all these were added and the officers arrived at the total cost of Rs. 27,05,412.24 as per the Worksheet enclosed to the show cause notice. Statements were also recorded and show cause notice was issued alleging suppression and misstatement of facts and demanding duty of Rs. 1,38,064.30 being the duty on the differential value of Rs. 8,76,598.64. Appellants denied all the allegations. It is stated that show cause notice is nullity as M/s. Orient Color Crafts had not been made a party to the proceedings. It is stated that M/s.
Orient Color Crafts had received the duty paid goods only on the strength of valid gate passes as the GPs clearly indicated the consignee; when the gate passes had been verified, examined by the Central Excise Officers and when the assessments had been done accordingly, the show cause notice against them does not lie. No statement had been recorded from the said Orient Color Crafts and in the absence of statement the allegation of collusion is without foundation. They also stated that they have determined the assessable value in respect of Printing Ink and the normal price is ascertainable as there is factory gate sale to industrial consumers viz. M/s.
Sudarsan Process, M/s. The Orient Processors. M/s. The Orient Color Crafts. The determination of assessable value is based on the following factors:-- (b) conversion cost (grinding charges) (including manufacturing overheads) up to state of excisability of the product They submitted that they had filed the price list under Part-I, and assessable value so determined nave been adopted for captive consumption also. The department has assessed RT-12 returns based on the assessable value approved in the price list. They also state that assessable value determined by the petitioner firm under Pail-I is not a favoured price and hence there is no contravention of Rule 173L. They stated that the firm had effected sales at factory gate nearly to 5.87% and the rest have been consumed captively. They relied upon RT-12 returns for 1990-91 in this regard and submitted therefore there was no question of filing price list under Part IV or under Part VI.3. In this regard, they relied on the judgment rendered by the Tribunal in the case of H.M.T. Ltd. v. CCE and various other judgments. They pointed out internal audit party had visited the factory on 17.1.91 and 18.1.91. They had submitted the cost structure to the internal audit party on 6.3.91 for certain items referred in the approved price list. The same had been audited and approved on the price list. They submitted that they had filed the price list along with questionnaire as per Board's circular dt. 1.2.88 and they had followed the Board's circular. They also referred to the letter issued by the Assistant Collector to them on 11.6.91 and again another letter written by the Superintendent on 17.5.91. They also stated that they had furnished the details of clearances and also the duty they were due and payment made by them. They contested the claim both on merits and on time bar aspect.
4. The Collector in the impugned order has granted the SSI exemption under Notification No. 175/86 and thereafter he has proceeded to compute the duty in terms of the allegations and confirmed the demand of Rs. 37,034/- and imposed penalty as such.
5. Arguing for the appellants, Learned Counsel initially submitted that the valuation adopted by the appellants in Part-I price list has to be accepted in terms of judgment cited by him and he submitted that there is no need for them to file separate price lists in Part-IV and Part VI. He further submitted that demands raised by the department is barred by time. As the department itself had approved the price list, there was no suppression and internal audit party had already examined all their records on 6.3.91 and had affixed on all the documents.
Though the Assistant Collector had written to them on but same was not adjudicated nor there was allegation of suppression on the said letter.
Again another letter was addressed by Superintendent on 17.5.91 and even in that there was no allegation of suppression. Therefore, he submitted that demand on allegation of suppression on 11.11.91 for the period 1.4.90 to 31.12.90 is totally unsustainable. He pointed out that there cannot be penalty on 9 partners as they having been examined and they were only sleeping partners. He submits that they had given calculations by which they had made excess payment of Rs. 2,83,038.94 for the relevant period at 15% BED plus 5% SED on BED. Therefore, excess payment now made is also totally unsustainable.
6. Learned DR submits that they had suppressed details as delineated in the show cause notice and the Collector examined all the points and has rejected their pleas. Therefore, the computation of duty arrived at by Collector is totally sustainable including imposition of penalty.
7. On careful consideration of submissions made, we notice that appellants had already declared their price in Part-I. They had given all the details pertaining to price and declared the parties to whom they were supplying. They had also given details in the questionnaire along with the proforma for determining the value under Section 4 of C.E. Rules as required by the Board's circular noted supra. The said price list had been approved and subsequently the price lists had also been audited and found to be correct. Appellants' RT-12 returns have been approved time and again. Further, it is noticed that Asstt.
Collector himself had issued notice on 11.6.91 raising certain demands on the very issue but same has not been adjudicated. In the said notice of 11.6.91, the Assistant Collector has not alleged any wilful suppression or wilful intention to evade payment of duty. Again the department through Superintendent issued a letter on 17.5.91 raising demand to the tune of Rs. 11,708.55 on the same issue. Therefore, it is very clear that the department had all the information pertaining to party's transactions. It cannot be said that there has been wilful suppression or misdeclaration or undervaluation in the present case.
Hence, subsequent show cause notice issued on 11.11.91 invoking larger period under proviso to Section 11A of the Act is totally unsustainable.
8. We are confining our order only on time bar aspect and we notice that demand raised in the present case is totally barred by time.
Without going into merits of the case, we set aside the impugned order and allow the appeal only on time bar. We find from the impugned order that the Collector has not adverted to various pleas raised on time bar including the reference made to all the documents.